Entrepreneurial Finance Lab

Psychometric credit scoring company Entrepreneurial Finance Lab (EFL) announced today it has merged with alternative credit score provider Lenddo. The two companies have joined forces to offer a suite of credit scoring and identity verification products.

Both companies share a mission of “providing financial inclusion for more than one billion new and underserved individuals across the globe.” The new, combined company’s products will be available in more than 20 emerging markets, enabling lenders in those markets to offer citizens access to financial products and tools. Because of limited financial data and credit history availability, access to financial products has been previously unavailable to this underserved group.

“This merger will allow us to apply the right data at the right time on a per client basis, allowing people to use their digital profiles and personality traits to increase their financial options. Financial institutions across emerging markets will be able to predict risk like never before through the combination of our data sources and innovative risk modeling techniques,” said Jared Miller, CEO of EFL.

Each company has facilitated more than 5 million credit assessments since launching– EFL in 2010 and Lenddo in 2011– and have individually helped more than 50 financial institutions to disburse more than $2 billion in credit to people with limited information. The combined company will serve individuals and small businesses by offering banks, telcos, retailers, microfinance institutions, and insurers access to global data as well as machine learning and risk modeling techniques. Borrowers have the ability to choose if and when lenders use their psychometric, social media, and mobile phone data to underwrite risk.

The two entities will operate independently at first and will announce further changes over the next few months. The companies anticipate a name change will “most likely” happen, and expect to announce a branding decision in early 2018. The terms of the agreement were not disclosed.

The first joint product offering went live in Asia and Latin America yesterday. Additional products and features will be announced in the “coming months.”

Headquartered in Bermuda, EFL showcased its credit scoring tool at FinovateAsia 2012 in Singapore. Last year, the company teamed with FICO to enhance the company’s credit scoring methodology. EFL was recently nominated as a finalist in the 2017 MIT Inclusive Innovation Challenge.

One of the joys of being a part of fintech is watching companies with long and distinguished pedigrees find new ways to put their tried and true solutions to use. The recently announced partnership of 50-year old FICO partnering with 10-year old psychometric scoring specialist EFL Global—to promote financial inclusion outside the United States—is another example of this trend.

Specifically, the partnership will enable FICO clients to use the analytic credit-scoring technology developed by EFL Global. Added to FICO’s own credit-scoring products, the solutions—available initially in three countries: Turkey, Mexico, and Russia—will provide another way for lenders to reach members of underbanked communities.

EVP of Scores at FICO Jim Wehmann praised EFL’s years of experience working with thin-file consumers and SMEs with little or no credit histories in 30 countries. “Combining this with FICO’s credit-scoring expertise and market reach takes us another step closer to helping people [live] better lives,” Lehmann said, “which also can have a positive impact on the economy.”

Psychometric technology uses the “validated consumer-contributed data” provided by surveys to assess a consumer’s ability and willingness to repay loans. Developed initially at Harvard University, psychometrics has validated more than a billion dollars in lending according to EFL, and helped encourage the use of alternative data in credit and risk scoring. DJ DiDonna, EFL chief strategy officer and co-founder, called both companies’ technologies and visions “complementary” and looked forward to FICO and EFL “working together to help information-scarce households and entrepreneurs gain access to affordable credit.”

The partnership between FICO and EFL is part of the pair’s commitment to global financial inclusion. “We estimate that more than 3 billion consumers globally could gain access to credit at affordable rates if there were an effective way to assess their ability and willingness to repay loans,” Wehmann said. In addition to EFL, FICO is partnered with Equifax and LexisNexis in the U.S. and with Lenddo internationally to create “new scoring products, partnerships, services, and platforms” designed to “empower a lender’s optimized decision making.”

EFL demoed its technology at the very first FinovateAsia conference in 2012. The Bermuda-based company presented its EFL Credit Scoring Tool which integrates readily into existing bank systems and scores a potential borrower’s ability and willingness to pay based on behavioral and character-based predictive analytics. Founded in 1956 and headquartered in Silicon Valley, FICO made its FinDEVr debut at FinDEVr New York 2016 this spring with a presentation titled “Rapidly Deliver Contextually Powered Stream Processing.” The company is publicly traded on the NYSE under the ticker “FICO,” and has a market valuation of more than $3 billion. With the most widely used credit score in the world and a number of Fortune 500 firms among its clients, FICO says that $90 billion are saved each year by its products and solutions. Will Lansing is CEO.